Home care — the types of services regularly delivered in a senior’s home over the course of months and years, rather than days or weeks — has steadily risen to newfound prominence of late.
Today, in fact, it’s now seen as the “tip of the spear” for the entire U.S. health care system, according to Peter Ross, co-founder and CEO of Towson, Maryland-based home care franchiser Senior Helpers. Backed by Altaris Capital, Senior Helpers has more than 320 locations in its franchise network, spanning 43 states and three different countries.
“We’re starting to get recognition,” Ross said Wednesday during a panel discussion at the Healthcare Innovation and Investment (HI2) Conference in Chicago. “The health care system is saying, ‘As home care, you’re really a part of us. You’re the tip of the spear. You’re in the home.’”
For proof of home care’s elevated status, one need only look at recent M&A activity.
In 2017, there were just 20 deals completed for home care companies, according to data from Atlanta-based M&A advisory firm Mertz Taggart. That figure more than doubled in 2018, jumping to 46 total transactions.
Meanwhile, there were at least six home care transactions in the first quarter of 2019.
While home health M&A activity is likely to feel like a rollercoaster ride in coming months because of a changing reimbursement landscape, home care dealmaking is expected to remain robust for the foreseeable future.
When it comes to M&A, a big chunk of home care deals has been spearheaded by private equity players. But that’s starting to change, according to Ross.
“I see more strategic partners getting in there in the future,” he said.
Of the nearly four dozen home care transactions last year, at least 13 came from publicly traded companies, including Baton Rouge, Louisiana-based Amedisys (Nasdaq: AMED) and Canada-based Nova Leap (TSXV: NLH), Mertz Taggart data shows.
To some extent, home care’s momentum may only be just beginning.
The oldest baby boomer doesn’t turn 80 until 2026 — and Medicare Advantage (MA) plans are only now starting to dabble with in-home services and supports focused on their members’ social determinants of health.
“We’re just at the tip of the iceberg,” Ross said.
Right at Home CEO Brian Petranick agreed. With a corporate headquarters in Omaha, Nebraska, Right at Home has more than 475 U.S. operating territories, providing a range of services in the home as well as in retirement communities, nursing homes, rehabilitation centers and hospitals.
“What’s interesting and what’s changed … is the industry has shifted,” Petranick said, also speaking at the HI2 Conference Wednesday. “People are starting to realize that with more care moving into the home environment, there is one group of people that really understands the dynamics of aging in the home — and that’s the people in our space.”
The realization is having a clear impact on home care companies’ bottom lines.
Right at Home, for instance, expects to hit more than $650 million in systemwide revenue in 2019, with over 32 million hours of care delivered across its operations, according to Petranick.
The main appeal of home care from an outcomes standpoint: its longitudinal relationship with clients.
“If you think about a typical home health transaction, it’s an event-based transaction,” Petranick said. “Something happens with a client, home health comes in to take care of them for a short period [of time]. They plug in and out of clients’ lives over the course of many, many years.”
“Home care, we’re there often before Medicare-certified home health comes in — and we’re there after,” he added.
Although home care is headed for big things, there are plenty of headwinds on the horizon.
Labor challenges are at the top of that list, according to Emma Dickison, president of Cincinnati, Ohio-based Home Helpers, a franchise network with more than 300 locations.
In 2018, the median home care caregiver turnover rate skyrocketed to 82%, according to the latest Home Care Benchmarking Study by market research and education firm Home Care Pulse.
To get around those labor obstacles, home care providers need to be nimble and think outside of the box, Dickison said. For Home Helpers, in particular, that has meant tapping into the recent retirees labor pool, along with veterans and the family members of active military members.
“I think we have to look at atypical ways and places to do that,” Dickison said at HI2. “What got us ‘here’ isn’t going to get us ‘there.’ We have to be very creative and innovative in how we attract and keep caregivers and staff moving forward.”
Per usual, ongoing state and federal regulation is also a headwind. In certain states, that has taken the form of caregiver registry initiatives.
Most recently, though, the hot-button state issue has come from Connecticut, which is on the brink of finalizing legislation that would prohibit home care agencies from enacting noncompete and nonsolicitation agreements with their caregivers. In general, such agreements are typically used to prevent caregivers from poaching agency clients.
Broadly, Medicare Advantage can be either a headwind or tailwind moving forward, depending on how it plays out, the three home care executives agreed.